You don't mend a #BrokenRecord by smashing the record player

Running an organisation representing virtually every significant digital service and music retailer in the UK, I have witnessed at first hand the chaos and destruction wrought by the coronavirus these past two months – shops shuttered, thousands of staff furloughed, supermarkets forced to prioritise basic necessities like milk and eggs over music.

Many of our members are still in dire straits. Some may find it difficult to survive.

On the other hand, these past weeks have also seen ERA’s members at their very best. We have seen previously old school indie record shops transforming themselves into successful online retailers. After a steep drop in sales at the beginning of the lockdown, thanks to the efforts of retailers, we’ve seen a remarkable rebound.

On the digital side, we have even seen the surprise renaissance of the download – up 30% to 50% in recent weeks - while subscription streaming, the great engine room of the recorded music industry, has continued its growth trajectory.

All in all, it has amounted to a ringing endorsement of a sector which rarely seeks the limelight and confirmation of our long-held belief that the key to a successful and resilient music retail sector is diversity. A business accustomed to thinking of it being about physical versus digital, indies versus multiples and supermarkets and internet retailers has learned over the years that they have different strengths, address different parts of the market and are stronger together. So far, so good.

Against this background, what should we make of the growing demands by artists and songwriters to #FixStreaming?

The effective closure of the live music business has robbed many musicians of their biggest single source of revenue. It is no wonder that this has focused attention on the relatively low returns many feel they see from the use of their recordings by digital service providers (DSPs).

ERA is a strong supporter of artist’s rights. Putting the interests of creators as well as consumers at the heart of all we do is one of our five key priorities – as outlined in the ERA Manifesto.

I fear, however, that amid this heated debate the contribution of DSPs to the revival of recorded music is being forgotten and numbers are being bandied about which are just plain misleading.

Let’s start with the numbers

A key complaint is that streaming services pay “only” around 70% of subscription fees for the music. The reality is that this is almost identical to the percentage of revenue paid-for downloads and that in turn is little different to the margin on physical sales.

If it is “fair” to reduce the money Amazon or Deezer or Spotify, for instance, retain to run their businesses, it must be equally fair to do the same to iTunes, HMV and even Rough Trade, and no one is seriously suggesting that.

The point is that even if services paid 100% of the money they receive from music fans, it would not necessarily answer current complaints. Manchester-based singer-songwriter @LoneLadyHQ writes on Twitter that she has earned just £40.22 for all her streams over the past six months.

There’s no knowing what the deals were which led to this sum, but it is clear that grossing up £40.22 to the £57.46 it would be if digital services worked for free would not make her fortune.

When critics are not complaining about the money DSPs need to run their businesses, they often point to the relatively small sums earned by artists like Lone Lady. But it is inevitable that the huge catalogues offered by streaming services will produce a large number of low earners.

The biggest record store in the world until it closed in April was the Amoeba Records branch in Hollywood, Los Angeles. It reportedly stocked 100,000 album titles. At a (very generous) average of 15 tracks per album, that means Amoeba offered 1.5m tracks. In contrast, Apple Music and Spotify each offer 60m tracks, the equivalent of 4m albums at 15 tracks an album.

The fact is that the larger the number of tracks, the larger the number of low earners as well as high earners.

The fact that a streaming service has a large number of low earners is not necessarily an indictment of that service. No physical store on the planet could accommodate 4m physical albums. The fact is that without streaming services millions of tracks would simply never be heard at all.

An easy way to increase the average earnings of musicians on streaming services would be to dramatically cut back the number of tracks on those services, but no one is suggesting that either.

The other numerical line of attack against streaming services is to focus on the tiny amount of money generated by each stream and then to contrast that with what artists earn from a CD. That comparison is of course completely bogus as it reflects completely different business models. With a CD the artist is paid in advance for as many (or as few) times you ever play it; with streaming of course they are paid as you play.

Different models: simply not comparable.

Which is not to say artists’ concerns are not real. In some cases old contracts and old assumptions first made in the age of the vinyl LP have been transplanted one to one to the new world of streaming in a way some artists may feel is unfair. But these are not contracts with streaming services themselves and DSPs can’t be held responsible for them.

The fact is, streaming services have overwhelmingly been a force for good.

Remember Grokster, Kazaa or Morpheus? I thought not. These were just three of the pirate networks which wreaked havoc on the record business in the first decade of this century.

The decline of piracy exactly mirrors the rise of digital services. In the case of streaming, these services have pulled off what many thought impossible – luring whole populations away from something they could get for free to something they willingly pay for because it is better and more convenient.

The UK record business is a billion pounds a year better off because of the innovation and investment of digital services. Artists and songwriters who would be receiving nothing for their work are now earning money. Would it be better if they received more? Of course. But it requires two things to happen.

First, the music-making community needs to resolve once and for all how best it wants to divide up the 70p in the pound it receives from every premium subscription. So-called user-centric licensing – in which each subscriber’s money is divided up only among the tracks they actually listen to - is one model. But it is not the magic bullet some people believe. Naturally any change in the way revenues are allocated will not only create winners. There will be losers too. Any change to the distribution of all of those 70p’s will need to be considered carefully. Luckily there is a wealth of data from streaming services which is likely to be the key to resolving it.

Resolved, it should be, however. How the pie is divided is no business of ours, but if this debate is not resolved, it threatens to undermine public trust in streaming. One of the industry’s key arguments against piracy was a moral one, that artists deserve to be paid. If the suspicion grows that the £120 a year many are paying for streaming services is not properly or fairly allocated to artists and songwriters, that argument is undermined.

The other key driver of artist and songwriter income is, of course, the growth in penetration of streaming. Our aim should be nothing less than that every music fan in the country is using a streaming service.

ERA’s latest quarterly tracking study suggests 2.8m Britons started streaming for the first time over the past year, a startling achievement. Inevitably growth is tailing off in the younger age groups which are already approaching saturation, but there was an incredible 1.1m increase in the number of over-55s streaming. Driving growth, encouraging new users and persuading people not currently paying to stream music to do so, are our priorities. That as much as anything is the guarantor that artist and songwriter incomes will continue to rise.

The #BrokenRecord and #FixStreaming debate should be welcomed. It is not just an abstract issue of “fairness” that artists and songwriters get paid. It is of course their work which drives the entire music industry. At a fundamental level we would not be here without them. They need not only to be paid fairly, but also to feel that they are being paid fairly.

However, everyone involved in the debate should recognise that you don’t mend a #BrokenRecord by smashing the record player. The streaming revolution saved the record business. It would be short-sighted and self-defeating if in attempting to #FixStreaming, we ended up undermining it.